In the 1920s, bank collapses were a direct result of unregulated practices by banks. Glass-Steagal was passed in 1933 and helped stabilize banking practices. The relaxation of Glass-Steagal and the later complete removal of the firewall between banks and investment houses resulted in a second collapse.
Bank collapses were the result of the Federal Reserve expanding the money supply and the government encouraging fractional reserve banking. Bank collapses would be avoided without the business cycle that the Fed creates and with full reserve banking, which is the only way a profitable bank could possibly operate in a free market.
why warehouses that lend out their contents suck
^ Thread winner.
That’s not true.
Throughout history the business cycle has been observed only during periods of fractional reserve banking and fiat money. This is because the business cycle is created by artificial lowering of interest rates and by the expansion of money supply through central banks. Expansion of the money supply results in the misallocation of resources; artificial lowering of interest rates creates an illusion of easy credit resulting in malinvestment.
When this bubble bursts we get a recession, free markets are blamed and more regulation is called for; the cycle then repeats itself.
There wasn’t a free market in 1920?
Certainly not. The federal reserve was introduced in 1913. There was also several periods of fiat money usage and debasement of the currency before the federal reserve was even introduced.
You may want to check out this thread from a few days ago:
https://forum.freecapitalists.org/t/article-book-on-origins-of-glass-steagall-act/2994